Opinion

Editorials

USDA loans to sugar processors may not be repaid

By Alexandra Wexler Dow Jones Newswires

Posted:
06/26/2013 05:41:16 PM MDT

Updated:
06/27/2013 08:54:20 AM MDT

NEW YORK — Three sugar companies — including Denver-based Western Sugar Cooperative — received the majority of the $1.1 billion in federal loans made to processors of the sweetener this fiscal year, according to Department of Agriculture documents viewed by The Wall Street Journal.

Disclosure of the loan recipients comes as domestic sugar prices are trading around four-year lows, raising concerns that some processors — who turn sugar cane or sugar beets into the sweetener — may not be able to repay what they owe, USDA officials have said. As of Wednesday, $644 million in loans remained outstanding, according to the USDA website. The bulk of the loans come due Aug. 1.

Western Sugar Cooperative, Amalgamated Sugar Co. LLC, Michigan Sugar Co. and — all sugar-beet processors — borrowed 55 percent of the funds. The loan recipients were identified on USDA documents viewed by The Wall Street Journal following a Freedom of Information Act request.

The fact that about half of the country's processors were among this year's borrowers shows how the sugar industry has integrated cheap government cash into its operations. During the past nine years, the government has lent $8.8 billion to sugar processors. The 2012 loans were granted with an interest rate of 1.125 percent to 1.250 percent, depending on the month in which they were issued.

Advertisement

The U.S. sugar program — a complex collection of loans, price supports and import restrictions — is designed to support sugar growing and processing businesses in the U.S., despite the availability of cheaper sugar on the world market. The American Sugar Alliance, an industry group, says some processors would have trouble securing loans in the private sector and need the support to stay competitive amid record imports of Mexican sugar.

Domestic sugar prices on the ICE Futures U.S. exchange have tumbled 45 percent over the last two years. U.S. sugar futures settled Wednesday at 19.45 cents a pound. The USDA has said that some processors may not be able to repay their loans if prices stay below 21 cents a pound.

Amalgamated Sugar, owned by a cooperative of sugar-beet growers and based in Idaho, borrowed $274 million, or 26 percent of the total loans this fiscal year, which ends Sept. 30, according to USDA data. As of Wednesday, Amalgamated still owed about $168 million, according to loan information posted on the USDA website.

The second-largest borrower was Michigan Sugar, based in Bay City, Mich., which took out about $167 million in loans and still owes about $70 million.

Rounding out the top three is Western Sugar with about $147 million in loans this year, $99 million of which remain outstanding. A representative at Western Sugar declined to comment.

OTTAWA, Ontario (AP) — The death of actor Leonard Nimoy last week has inspired people to post photos on social media of marked-up five-dollar Canadian banknotes that show former prime minister Wilfrid Laurier transformed to resemble Spock, Nimoy's famous "Star Trek" character. Full Story